By Chris DeNigris – Ireland’s role as a hedge fund domicile and service centre continues to strengthen despite the country’s wider economic woes and the problems of its banking sector, as well as the general uncertainty surrounding the solvency of EU countries and the global economic environment.
According to the Irish Funds Industry Association, the assets of Irish-domiciled investment funds set a new record of EUR1,008bn in November 2011, a 4.7 per cent increase over the previous 12 months. This extremely positive sign for the country’s financial industry reflects the sheer competitiveness of its nature, its commitment to innovation, and Ireland’s all-round excellence as a jurisdiction.
Ireland has also gained an enduring competitive advantage from being one of the first regulated jurisdictions to put in place a solid legal infrastructure for hedge funds. It has been specialising in administration of alternative funds for more than a decade, and today more than 40 per cent of the global industry is domiciled and/or serviced in Ireland.
The country’s best-of-breed service providers include most of the leading global names, and they can draw on a highly talented and experienced workforce. Coupled with the strong regulatory framework and sophisticated oversight from the Central Bank of Ireland, this gives investors considerable confidence and encourages the growth of fund assets.
Ireland has also benefited from development of the sophisticated Ucits sector alongside its existing role as a centre for retail funds. The total assets of Irish-domiciled Ucits grew 3 per cent last year to EUR783bn; according to the IFIA, the country’s share of the overall Ucits market has grown from 10 per cent in 2007 to 14 per cent at the end of September last year.
The increasing complexity of some Ucits funds and the increased focus on transparency among investors and regulators has posed new challenges to fund administrators, which in turn has prompted increased demand for Koger’s NTAS transfer agency software.
Service providers are seeing the need for a software system that provides great flexibility around reporting on underlying data. They regard as equally important the level of expertise enjoyed by the software provider within the alternative fund market, providing the ability to adapt effectively to any change in regulatory requirements – a key issue at present as the deadline for implementation of the European Union’s Alternative Investment Fund Managers Directives draws nearer.
The AIFMD has been the most pressing regulatory issue in recent months for our third-party administrator clients. The technical advice on implementing measures sent to the European Commission in November by the European Securities and Markets Authority lays out general guidelines for managers on transparency rules, leverage, and other operational issues.
The document provides at least slightly better visibility on the impact of the directive than was available a year ago from the final legislative text. Administrators in particular are gearing up for an anticipated surge in demand for reporting. They will have to be more flexible and adapt to their client’ requirements – as the best always do already.
In an increasingly competitive market environment, our clients are actively trying to differentiate themselves by utilising best-in-class software. It is no longer acceptable to manage shareholder balances on Excel spreadsheets, with all the risk of fraud or error that entails.
That may mean managers outsourcing to an administrator that uses a proper TA system such as NTAS, or choosing to shadow the administrator’s work using NTAS in-house. Either way, it creates a lot of demand for our products.
Chris DeNigris is managing marketing and sales globally for Koger
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